Revenues

$1.125 billion

GAAP Net Income

$168 million

GAAP EPS

$5.53

Non GAAP Net Income

$209 million

Non GAAP EPS

$6.88

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

September 30,

September 30,

2018

2017

ASSETS:

Current assets:

     Cash and cash equivalents

$                90,023

$                  105,618

     Accounts receivable, net

208,865

168,586

     Prepaid expenses and other current assets

39,624

36,727

          Total current assets

338,512

310,931

Marketable securities and investments

19,756

25,515

Property and equipment, net

48,837

40,703

Goodwill and intangible assets, net

815,426

825,599

Other assets

32,548

52,872

$            1,255,079

$               1,255,620

LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:

     Accounts payable and other accrued liabilities

$                50,708

$                    51,614

     Accrued compensation and employee benefits

84,292

77,610

     Deferred revenue

52,215

55,431

     Current maturities on debt

235,000

142,000

          Total current liabilities

422,215

326,655

Long-term debt

528,944

462,801

Other liabilities

40,183

39,627

          Total liabilities

991,342

829,083

Stockholders' equity

263,737

426,537

$            1,255,079

$               1,255,620

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(In thousands, except per share data)

(Unaudited)

Quarter Ended 

Year Ended

September 30,

September 30,

2018

2017

2018

2017

Revenues:

     Transactional and maintenance

$            200,711

$         171,056

$ 766,059

$       652,660

     Professional services

44,891

50,871

176,804

179,569

     License

34,189

31,278

89,612

99,940

        Total revenues

279,791

253,205

1,032,475

932,169

Operating expenses:

     Cost of revenues

79,431

75,202

310,699

287,123

     Research & development

34,407

30,226

128,383

110,870

     Selling, general and administrative

94,324

84,262

380,362

339,796

     Amortization of intangible assets

1,551

2,712

6,594

12,709

     Restructuring and acquisition-related

-

-

-

4,471

        Total operating expenses

209,713

192,402

826,038

754,969

Operating income

70,078

60,803

206,437

177,200

Other expense, net

1,432

(6,601)

(18,427)

(25,876)

Income before income taxes

71,510

54,202

188,010

151,324

Provision for income taxes

21,030

14,158

45,595

23,068

Net income

$             50,480

$           40,044

$ 142,415

$       128,256

Basic earnings per share:

$                 1.74

$              1.31

$      4.79

$            4.16

Diluted earnings per share:

$                 1.64

$              1.25

$      4.57

$            3.98

Shares used in computing earnings per share:

     Basic

29,077

30,534

29,711

30,862

     Diluted

30,702

31,963

31,180

32,245

FAIR ISAAC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 Year Ended 

 September 30, 

2018

2017

Cash flows from operating activities:

 Net income 

$           142,415

$            128,256

 Adjustments to reconcile net income to net cash provided by  

   operating activities: 

       Depreciation and amortization 

30,182

36,214

       Share-based compensation 

74,814

61,222

       Changes in operating assets and liabilities 

(39,493)

4,347

       Other, net 

15,134

(4,395)

          Net cash provided by operating activities 

223,052

225,644

 Cash flows from investing activities: 

 Purchases of property and equipment 

(31,299)

(19,828)

 Net activity from marketable securities 

(2,820)

-

 Other, net 

20,000

(777)

          Net cash used in investing activities 

(14,119)

(20,605)

 Cash flows from financing activities: 

 Proceeds from revolving line of credit 

427,000

190,000

 Payments on revolving line of credit 

(531,000)

(84,000)

 Proceeds from issuance of senior notes 

400,000

-

 Payment on senior notes 

(131,000)

(72,000)

 Proceeds from issuances of common stock 

11,023

14,474

 Taxes paid related to net share settlement of equity awards 

(44,205)

(40,232)

 Repurchases of common stock 

(342,596)

(187,629)

 Other, net 

(7,849)

(1,238)

          Net cash used in financing activities 

(218,627)

(180,625)

 Effect of exchange rate changes on cash 

(5,901)

5,278

 Increase (decrease) in cash and cash equivalents 

(15,595)

29,692

 Cash and cash equivalents, beginning of year 

105,618

75,926

 Cash and cash equivalents, end of year 

$             90,023

$            105,618

FAIR ISAAC CORPORATION

REVENUE BY SEGMENT

(In thousands)

(Unaudited)

Quarter Ended 

Year Ended

September 30,

September 30,

2018

2017

2018

2017

Applications revenues:

     Transactional and maintenance

$  96,668

$  90,524

$   381,109

$ 348,861

     Professional services

35,366

38,886

142,908

141,857

     License

23,811

20,873

61,554

62,449

          Total Applications revenues

$ 155,845

$ 150,283

$   585,571

$ 553,167

Scores revenues:

     Transactional and maintenance

$  91,596

$  69,524

$   337,530

$ 259,780

     Professional services

286

847

1,751

2,849

     License

836

1,654

3,367

3,725

          Total Scores revenues

$  92,718

$  72,025

$   342,648

$ 266,354

Decision Management Software revenues:

     Transactional and maintenance

$  12,447

$  11,008

$     47,420

$  44,019

     Professional services

9,239

11,138

32,145

34,863

     License

9,542

8,751

24,691

33,766

          Total Decision Management Software revenues

$  31,228

$  30,897

$   104,256

$ 112,648

Total revenues:

     Transactional and maintenance

$ 200,711

$ 171,056

$   766,059

$ 652,660

     Professional services

44,891

50,871

176,804

179,569

     License

34,189

31,278

89,612

99,940

          Total revenues

$ 279,791

$ 253,205

$ 1,032,475

$ 932,169

FAIR ISAAC CORPORATION

NON-GAAP RESULTS

(In thousands, except per share data)

(Unaudited)

Quarter Ended 

Year Ended

September 30,

September 30,

2018

2017

2018

2017

GAAP net income

$ 50,480

$ 40,044

$ 142,415

$ 128,256

Amortization of intangible assets

1,551

2,712

6,594

12,709

Restructuring and acquisition-related

-

-

-

4,471

Stock-based compensation expense

20,183

17,676

74,813

61,222

Realized gain on cost-method investment

(10,000)

-

(10,000)

-

Income tax adjustments

(3,503)

(6,515)

(18,860)

(24,316)

Excess tax benefit

(7,556)

(1,198)

(22,253)

(24,746)

Tax Cuts and Jobs Act

6,774

-

21,614

-

Non-GAAP net income

$ 57,929

$ 52,719

$ 194,323

$ 157,596

GAAP diluted earnings per share

$    1.64

$    1.25

$      4.57

$      3.98

Amortization of intangible assets

0.05

0.08

0.21

0.39

Restructuring and acquisition-related

-

-

-

0.14

Stock-based compensation expense

0.66

0.55

2.40

1.90

Realized gain on cost-method investment

(0.33)

-

(0.32)

-

Income tax adjustments

(0.11)

(0.20)

(0.60)

(0.75)

Excess tax benefit

(0.25)

(0.04)

(0.71)

(0.77)

Tax Cuts and Jobs Act

0.22

-

0.69

-

Non-GAAP diluted earnings per share

$    1.89

$    1.65

$      6.23

$      4.89

Free cash flow

Net cash provided by operating activities

$ 59,963

$ 54,221

$ 223,052

$ 225,644

Capital expenditures

(7,079)

(5,036)

(31,299)

(19,828)

Dividends paid

-

-

-

(1,238)

Free cash flow

$ 52,884

$ 49,185

$ 191,753

$ 204,578

Note: The numbers may not sum to total due to rounding.

About Non-GAAP Financial Measures

To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, excess tax benefit, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures and dividends paid.  The presentation of these financial measures is not intended to be considered  in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. 

Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.  Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses.  We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods.  These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to our competitors' operating results.  We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.

FAIR ISAAC CORPORATION

RECONCILIATION OF NON-GAAP GUIDANCE

(In millions, except per share data)

(Unaudited)

Fiscal 2019 Guidance

GAAP net income

$                          168

Amortization of intangible assets

6

Stock-based compensation expense

85

Income tax adjustments

(25)

Excess tax benefit

(25)

Non-GAAP net income

$                          209

GAAP diluted earnings per share

$                         5.53

Amortization of intangible assets

0.20

Stock-based compensation expense

2.79

Income tax adjustments

(0.81)

Excess tax benefit

(0.82)

Non-GAAP diluted earnings per share

$                         6.88

Note: The numbers may not sum to total due to rounding.

About Non-GAAP Financial Measures

To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, excess tax benefit, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures and dividends paid.  The presentation of these financial measures is not intended to be considered  in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. 

Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.  Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses.  We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods.  These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to our competitors' operating results.  We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.